Investing in dairy improvements can evoke a mix of stress and excitement. Return on investment (ROI) is a key factor when choosing the best investments for the dairy.
ROI analyses compare the net profit from an investment to its cost. Though ROI is a useful tool when evaluating different options, other management and financial factors should also be considered.
Tighten Procedural Drift
Many investments, like facilities or technology, are meant to help solve a problem. However, if the care and attention to detail in daily operations are not optimal, the ROI may not be positive.
For example, investing in a new transition cow facility can offer significant benefits in increased cow comfort and reduced stress during calving. Before investing in the facility, farmers should ensure that employees understand and respond appropriately to cow problems. Training and understanding standard operating procedures will help maximize the value of the investment. No financial benefit is gained if practices are not followed correctly.
Invest in the Day-to-Day
Investments in management practices can require little to no capital and yield a high ROI. Feed costs are the highest direct costs for the dairy farm, while poor reproductive efficiency can be one of the most significant hidden costs. Making investments in these areas often boosts dairy profitability.
An efficient feeding program can significantly reduce costs for a dairy operation. Prioritizing the production of high-quality forage can offer some of the greatest savings. High-quality forages are more digestible, which boosts milk production and lowers the need for supplemental feeds. Reducing shrink during harvesting and storage can also save money by preventing feed loss.
Investing in reproductive efficiency can yield a high ROI. Shorter calving intervals and higher conception rates can increase milk production across the herd and improve the herd’s genetic progress. Reducing the calving interval leads to greater lifetime milk production and lowers the average days in milk for the herd.
Strengths and Limitations
Awareness of the strengths and weaknesses of the operation and the investment will make investment decisions much easier. If the farm already has a strong understanding and implementation of management practices, investing in facilities or technologies may provide marginal returns.
Many investments can have multiple benefits and risks that are not foreseen. For example, reducing the calving interval can also lead to higher feed costs because the herd will be closer to peak milk production, thus increasing nutrient requirements. Capturing and including hidden strengths and risks of an investment will lead to a more reliable ROI estimation.
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